VC Aileen Lee highlights how the broader investor exodus is worsening woes for unicorn companies
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In this week’s episode of the StrictlyVC Download podcast, veteran VC Aileen Lee was direct about a major consequence of the recent boom-and-bust cycle: many companies stuck in limbo aren’t just struggling to regain their footing after raising too much money at unsustainable valuations; they’ve also lost the champions who once backed them.
Lee was discussing how limited partners hesitate to criticize powerful fund managers, fearing they’ll be shut out from investing in those firms again. But she imagined one thing they’d say if they could speak freely:
It’s not the fault of these newer investors, Lee continued. “Just a ton of people didn’t get trained and didn’t get any mentorship or apprenticeship were given checkbooks, and a lot of investments were made, and . . .there are a lot of orphaned companies,” as a result.
But there’s another reason startups are being left to their own devices “and I find this crazy,” said Lee; in many cases, companies have been orphaned by a more senior general partner “who led the investment – who is still there [at the firm] but just stopped showing up to the board meetings.”
As another longtime VC, Jason Lemkin, told this editor in late 2022 when VCs first stopped showing up at the board meetings of startups that were losing momentum: “[S]houldn’t there be checks and balances? Millions and millions are invested by pension funds and universities and widows and orphans, and when you don’t do any diligence on the way in, and you don’t do continual diligence at a board meeting, you’re kind of abrogating some of your fiduciary responsibilities to your LPs, right?”
Check out StrictlyVC Download weekly; new episodes come out every Tuesday.
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Editor in Chief & General Manager
Loizos has been reporting on Silicon Valley since the late ’90s, when she joined the original Red Herring magazine. Previously the Silicon Valley Editor of TechCrunch, she was named Editor in Chief and General Manager of TechCrunch in September 2023. She’s also the founder of StrictlyVC, a daily e-newsletter and lecture series acquired by Yahoo in August 2023 and now operated as a sub brand of TechCrunch.
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